Charter 2011 Annual Report Download - page 120

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2011, 2010 AND 2009
(dollars in millions, except share or per share data or where indicated)
F- 36
20. Related Party Transactions
The following sets forth certain transactions in which the Company and the directors, executive officers, and affiliates of the
Company are involved.
Charter is a party to management arrangements with Charter Holdco and certain of its subsidiaries. Prior to the Effective Date,
Mr. Allen had a significant interest in Charter Holdco resulting in these management arrangements constituting related party
transactions prior to that time. Under these agreements, Charter and Charter Holdco provide management services for the cable
systems owned or operated by their subsidiaries. The management services include such services as centralized customer billing
services, data processing and related support, benefits administration and coordination of insurance coverage and self-insurance
programs for medical, dental and workers’ compensation claims. Costs associated with providing these services are charged
directly to the Company’s operating subsidiaries and are included within operating costs in the accompanying consolidated
statements of operations. Such costs totaled $249 million, $246 million, $21 million and $217 million for the years ended
December 31, 2011 and 2010 (Successor), one month ended December 31, 2009 (Successor) and eleven months ended November
30, 2009 (Predecessor), respectively. All other costs incurred on behalf of Charter’s operating subsidiaries are considered a part
of the management fee and are recorded as a component of selling, general and administrative expense, in the accompanying
consolidated financial statements. The management fee charged to the Company’s operating subsidiaries approximated the
expenses incurred by Charter Holdco and Charter on behalf of the Company’s operating subsidiaries in 2011, 2010 and 2009.
CC VIII, LLC Interest
For the year ended December 31, 2009, pursuant to indemnification provisions in the October 2005 settlement with Mr. Allen
regarding the CC VIII, LLC (“CC VIII”) interest, the Company reimbursed Vulcan Inc. approximately $3 million in legal expenses.
Allen Agreement
In connection with the Plan, Charter, Mr. Allen and CII entered into a separate restructuring agreement (as amended, the “Allen
Agreement”), in settlement and compromise of their legal, contractual and equitable rights, claims and remedies against Charter
and its subsidiaries. In addition to any amounts received by virtue of CII’s holding other claims against Charter and its subsidiaries,
on the Effective Date, CII was issued 2.2 million shares of the new Charter Class B common stock and 35% (determined on a
fully diluted basis) of the total voting power of all new capital stock of Charter. Each share of new Charter Class B common stock
was convertible, at the option of the holder or the Disinterested Members of the Board of Directors of Charter, into one share of
new Charter Class A common stock, and was subject to significant restrictions on transfer and conversion. Certain holders of new
Charter Class A common stock (and securities convertible into or exercisable or exchangeable therefore) and new Charter Class
B common stock received certain customary registration rights with respect to their shares. As of December 31, 2010 (Successor),
Mr. Allen held all 2.2 million shares of Class B common stock of Charter. Pursuant to the terms of the Certificate of Incorporation
of Charter, on January 18, 2011, the Disinterested Members of the Board of Directors of Charter caused a conversion of the shares
of Class B common stock into shares of Class A common stock on a one-for-one basis. As a result of such conversion, Mr. Allen
no longer has the right to appoint four directors and the Class B directors became Class A directors. On January 18, 2011, directors
William L. McGrath and Christopher M. Temple, both former Class B directors, resigned from Charter’s board of directors. Edgar
Lee and Stan Parker were appointed to fill the vacant positions.
Stock Repurchases
See “Note 9. Treasury Stock” for the description of Charter’s purchase of shares of its Class A common stock from Franklin
Advisers, Inc., Oaktree Capital Management and Apollo Management Holdings. At the time of the purchase, funds advised by
Franklin Advisers, Inc., Oaktree Capital Management and Apollo Management Holdings beneficially held more than 10% of
Charter’s Class A common stock.